Starcomms risks bankruptcy if acquisition by Capcom fails – CEO

If shareholders of Starcomms Plc fail to support the proposed acquisition of the company by Capcom, the company will go bankrupt and fold up while the shareholders will lose their investments in the company, Mr. Olusola Oladokun, Interim Chief Executive Officer, Starcomms Plc, said in Lagos.

Speaking at a forum with newsmen, Oladokun said over the years, the company has been faced with numerous challenges due to the harsh operating environment and is experiencing difficulties in its operations.

He said the company’s Earnings Before Interest Taxes, Depreciation and Amortisation, EBITDA, has been on the negative side, a development which has made it impossible for it to meet up with its obligations to creditors, suppliers and other stakeholders.

He disclosed that Starcomms’ debt profile currently stands at N15 billion, adding that the company has stopped servicing its debts so as to conserve cash.

He explained that the company has defaulted in its debt service agreement with its creditors and suppliers, hoping that the debt would be restructured and repaid after the consummation of the deal with Capcom.

He said, “Starcomms financial position is very perilous with a negative operating performance. Starcomms is currently in default on all its credit facilities and the lenders would be within their rights to take over the company and liquidate it to try and recover as much value as possible. This would leave current shareholders with nothing.

”The deal is a win-win situation for the shareholders. The alternative is a zero value for existing shareholders as Starcomms is likely to go bankrupt as a stand alone company and cease to exist.”

Oladokun said all legal issues confronting Starcomms have been dropped, as the litigants have agreed to discontinue the cases to allow the companies have a new lease of life.

Also speaking, Mr. Demola Elesho, Chief Executive Officer Designate, Capcom, said if the shareholders and all the relevant regulatory agencies give the go-ahead to the acquisition, the company will repay all its debt by third quarter 2013, following ongoing debt restructuring talks with the affected parties.